This morning we're going to go ahead and kick off the IT services track by way of introduction I assume I can interrogate some of the IT services analyst responsible for the consulting outsourcing transaction processing group upfront, we have the rest of my team roaming in. Today we actually have a pretty jam packed day of IT services. This will be the first one. We're going to bounce around from rooms here. But we are going to go ahead and get started with MoneyGram International who is I think actually our latest coverage and if I'm not mistaken I think as far as 37 stock that we picked up coverage on so, we're excited about finally getting the coverage back up and running and Pam Patsley, the CEO is here with us along with Alex Holmes who is the Head of Corporate Strategy, Business Development, Investor Relations and jack of all trade. So thank you guys for being here with us today. I think I saw Eric earlier as well. So he's running around. He's with Investor Relations.

So let me just maybe by way of introduction and background ask you Pam to give us a couple of minutes on MoneyGram, who you guys are, help people sort of level set in terms of where you guys focused and any background information you can give us that would be great.

Pam Patsley

Okay, great. Thanks Julio. Good morning everyone. This sounds echoy but can you all hear plainly enough? Okay, great. So MoneyGram is a global remittance company and we operate in 192 countries and we are the second largest player in this industry with about 5% market share, it’s a very fragmented industry if you are not familiar with the industry between number one player and MoneyGram, so it's largest and second largest. We still have less than 25% of the global market share. 40% of cross border remittance is today are still handled through informal channels. So there is a tremendous opportunity for growth and to take share from each players, from our direct competitors, from banks to periodically and I would say more episodically provide this service and certainly from the informal channels.

While money transfer is the lion's share of our business, we also offer urgent bill pay solution today that's just in the US and recently like literally within the last six months, we ruled that out in Canada with the Canada post and its growing very nicely. We continue to focus on new technologies and enhancing and broadening our product offering so whether that's extending currencies that we expect, multi-currency spends or multi-currency receipts we are also ruling out direct to bank account with bank euro, Philippines is now active. You might have recently seen a press release; we have done that now with Banco Rendimento in Brazil and ICBC in China.

So it’s a growth industry and most importantly MoneyGram is outgrowing a growth industry. The World Bank estimates that global remittances are growing around 6 to 7% and that's about what they project going forward in Q4 that we just reported about 10 days ago. We had 13% transaction growth in money transfers.

So I could go on.

Unidentified Analyst

That's good. That's actually a good Segway into the first question in terms of thinking about your growth profile. So obviously a part of that is function size, part of that is you guys are obviously winning market share but maybe if you can dig into the nature of that growth profile, where you are outpacing what is the attribute at this point that gives you guys that faster overall growth, think about geographically or agent growth. What's the main search…?

Pam Patsley

Yes. It's an interesting question Julio. So when you are in a 192 countries, that's a little hard to just narrow it and so I am going to give you on two levels, one, just from a geographic look. We think about our business in three primary buckets, US to US, US outbound and then send originating outside the US. The profile of our businesses today on transactions about is almost a third, third, a third. On revenue it's much different. The US to US would be a little over 25% while since originating outside the US or about 47% on revenue. So that gives you a little bit of a perspective and clearly for MoneyGram if you are not familiar growing and the point of presence in all these other countries is newer. MoneyGram's legacy US business.

Having said that, the US to US businesses you know and we are very proud of this. For years now continues to put up double digit growth and we are still very much focused on that. The growth also then comes when you look at our agent network growth. For the fourth quarter we had 18% growth in our agent networks. We have a young network and it takes 12 to 18 months for that network to be fully productive. That's going to vary if you are signing someone that's been a money transfer seller before versus if you are initiating or inaugurating services with a new non-seller of money transfer services. So there is a lot of leverage just in our pipeline from the newness of our agent network if you will. So we're up to 267,000 locations at year-end.

Unidentified Analyst

Maybe just get Alex in the mix a little bit in here and have him talk about the competitive landscape and dynamics in terms of what you guys are seeing there. Very different trajectories, where you guys are versus the biggest competitor you have with Western Union. So maybe help frame a little bit about what you guys are going to do differently as you come forward from here and what markets are you really thinking about from an agent growth location where you think you have the most opportunity here.

Alex Holmes

Sure. I think from our perspective, we try to be to the market to our agents and to consumers the value player and the market and to us that means we offer not only a more competitive price but also a differentiated service at the point of sale and I think that plays very well with the agents that we've established over the years obviously our single largest agent is Wal-Mart and certainly that resonates very well with their model for everyday low prices in the market and we extend that somewhat to the other areas around the world and looking for agent partners that can bring that same value back into the consumer in those markets.

So as we think about where we've been, we've obviously been a US base company growing up in the US doing US to US, US to Mexico and since in the last 10 years really focusing on that international expansion and historically that was started in Western Europe and then move into other markets and I think as we did that, we had some nice growth and some new gains in those areas but really left a lot of the corridor pairing sort of untapped and really what we've been focused on recently in the last three years in particular has been, how do you make those corner pairs tie up and how do you get more productivity through your current agents as well as through new agents that you're going to be adding and really tie the nodes to the network together and make that more valuable to our agents and obviously to MoneyGram itself.

And so as you look where we have been filling those gaps I think obviously Russia and the CIS has been a big area of focus for us. Certainly Asia-Pacific is an area that is massive. It's got most of the world's population, very underpenetrated for us. Historically we've done some great things in the Indian subcontinent, across China, Philippines, big areas of focus on Malaysia, Malaysia is an interesting one to pause on. It’s the sixth largest send country in the world and I think a lot of people probably won't know that or see, you'd think of it as a receive market but it's truly a send market so how do you activate that, how do you get those corridors up and running.

And then coming closer to home I think in places like South America, US to Mexico is such a big business but when you think about further down South America and Argentina and Brazil and other areas I think historically we haven't looked at those inter-country opportunities in South America. We haven't had that robust network growth I think would be really beneficial to us and so we've been really focused on adding in that area as well.

Pam Patsley

I would just add and brag on our team a little bit. If you think about the ranking in order of size of set country. So the US is clearly the largest send country. Those US to US and US outbound double digit growth. Second largest send country in terms of transactions is Saudi Arabia and the third largest is Russia and in both of those countries we more than doubled our business. So think those are…

Unidentified Analyst

Got it. That's not a good…

Pam Patsley

Thing for MoneyGram.

Unidentified Analyst

Absolutely. One of the things that I think we're all sort of watching right now are things like, especially in the United States where the economy seems to have their previous data sets today. I think there was another pretty strong home builders index. So, just as it sort of translates that as it relates to your Mexico corridor and maybe the Latin America. As you see things like that coming back, employment, the labor indexes, how does that translate for you guys in terms of business opportunity? You maybe want to start to there and answer questions to that.

Pam Patsley

Okay, certainly we're all for lower unemployment in all parts of the world. We saw that several years ago when the Middle East came to a halt in the UAE and others because that part of the world is a huge send into South East Asia into India, Bangladesh and otherwise. So whether its housing in the US or unemployment in Spain, we benefit from a robust economy, but I will say that I think everyone will recognize these last few years have been everything but a robust economy and we've continued to gain share, the industry has continued to grow and we've grown faster that. So to me it's just additive and it should be an accelerator and again when you are the second largest player and you have 5% share in a very fragmented industry that itself is growing. That's just better news. We'll really please you specifically ask about Mexico so again I'll just touch on that. So I think we've had nine consecutive quarters of accelerating growth to Mexico and again that's been against the backdrop of a very poor economic environment particularly in the US and the Mexican worker and their employment prospects in the US the last few years. We've worked on that by focusing on our routine networks, focusing on the service delivery aspect and specifically focusing on awareness on the thin side in the US and getting that networks activated.

Unidentified Analyst

In Mexico, at least some of the growth there relative to what your competitors dealing with right now as it relates to southwest border, how would you juxtapose that as having been an opportunity for you guys? Were you guys especially gone in there and taking some market share or is there some other distinction in the way that there seems to be sort of struggling with what's going on down there versus where you guys are outpacing them right now?

Pam Patsley

I don't really see that our growth came at their peril or anything. I think we've continued to grow our network in Mexico. We have a very compliant program.

Alex Holmes

The Mexican market is extremely competitive; it's obviously many small niche competitors, some mid-tiered size guys that are really focused on that. You have the (inaudible) you have Seagate and others and so certainly what's your name, becomes a component of that competitive landscape but obviously they are just one player in that mix and so you really have to differentiate yourself at the point of sale, particularly when you are in the small mom and pop retail size networks where you get a lot of that Hispanic and Mexican volume. A lot of that is really going to be based on how you differentiate yourself for the consumer being very consistent I think helps a lot as well. You have a lot of the smaller guys like to move that effects rate around. They are inconsistent in their receive networks and the pickup and so, being consistent over time helps a tremendous amount and that's something that we pride ourselves on.

Unidentified Analyst

Maybe to think about the other side equation where there are some hotspots around the world and we saw some of that in this quarter with Spain and Italy and Greece. How are you navigating some of those markets where there is obviously more challenges in terms of end markets. What can you do there and would there even be any plans to maybe exit some of those markets at all or are they just short issues…

Pam Patsley

No we're not. We have no plans to exit those. We will stay the course and continue to look for opportunities. in Spain, I used this example a little earlier in talking to someone else, while unemployment among the immigrant population in Spain is somewhere near 30% and overall unemployment in Spain is something like 20 some percent, we are saying okay, well Spain, the Romanian worker isn't coming as often to Spain anymore and they are finding work other places. So there is two aspects to this, making sure we find that Romanian workers right now went to the UK or Germany and capturing that opportunity, but it's also looking at Spain and saying, Spain to Ecuador, Spain to Columbia, they were just product and service deliveries marketing awareness opportunities that we are trying to be a little bit surgical and find some quarters that we can ignite for growth while we ride out went to Spain to Morocco, went to Spain to Bulgaria, really come back to a more robust growth. In Greece we are finding strength quarters that were legacy Greece where the workers are now in. Germany or other parts, Eastern Europe and some a little bit in Western Europe so they are not going to same to our consumers resilient. Our consumer is also focused on having work and they'll move and that's the whole point of this.

Unidentified Analyst

That being it, in general it's turned out to be a much more migrant force than I think folks have this thing to do in more static in that sense. From a competitive perspective, I think we've always heard about the banks wanting to get into this space. Before jumping into some questions about technology and what that means to you guys, maybe just level us the opportunity or maybe the risks that are presented by banks that try to get into this release, historically that's been viewed as at least 52 weeks of value guys are the same.

Pam Patsley

Well let me start, first banks are agent in many, many parts of the world and I think they like being the agents of a global brand. So we built the network out, they can offer the service and they in their own country then can extend and attract possibly new customers or whatever. But for Wells Fargo there is really not banks singularly focused on this and again Wells is just focused on a few corridors and it’s a different product. I think there is nothing I see around the world particularly in the send countries that says a bank is offering a compelling opportunity for our consumer to come into their branch to execute their transaction. I mean it's just not the right environment.

Unidentified Analyst

Given the focus on technology here while we did the second half of my questions are going to focus on the efforts in online, electronic, mobile, all the different things that we see evolve with this base in particular. Maybe we start your online efforts the first point. Where do you guys see yourself currently in terms of online? Obviously Western Union has the $500 million target in terms of opportunity. How does MoneyGram think about that in terms of overall opportunity for continue to grow?

Pam Patsley

Yes, we are really pleased with our online product today but today our online product is only a US based initiative. And this month we will be launching MoneyGram.com in the UK and we have plans for 2012 to extend that to beyond the UK for other countries in 2012. So I would have liked if that were the case a year ago because we continue to see such great growth from MoneyGram.com. We had a 30% growth again this past year. It's very efficient. We are not spending huge marketing dollars. It's almost a product that people almost into it, that you know you are going to have. So I have great hopes for what we'll be talking about a year from now and the roll out as we go across Europe.

Unidentified Analyst

So to say that at MoneyGram.com I can send only from the US out to any part of the world or is it just US to US that I can send?

Pam Patsley

There are two aspects there. You can send MoneyGram.com out US to US or out and then in October we launched an affiliate program with Walmart.com so you can go to Walmart.com, you link over to MoneyGram.com that right now is where it’s a link from Walmart.com, it's just US to US. But I'm hopeful we'll continue to extend that with Walmart.com to US outside as well.

Unidentified Analyst

Okay, and staying on some of the technology, where does mobile fit into this and I always get all mixed up a little but you have the mobile person to person situation with some of the competition there and where does PayPal fit into some of these. That's another question where they are either P2P competitor or do you guys work with them. How should we think about sort of the mobile page outside of there?

Alex Holmes

Sure, I can start that one. I think it's important that you keep in mind the difference between a cross border remittance and a P2P payment. Obviously mobile has had quite a bit success in certain pockets of the world on the P2P payments. I think the evolution of the cross border remittance is something that's still in an infancy stage where we've seen successes for us and the competitive environment has been the utilization of the mobile phone to link back to the bank account to link to a money transfer site. To leverage the phone, to send funds around the world and where we've implemented those in Abu Dhabi and a few other places. We've seen some good successes with that and if you look at (inaudible) and Smarts and other people around the world where they've been very successful in the P2P space. I think the two have an opportunity in some point to marry up and really accelerate the growth of remittances in some ways. I think the challenge becomes the balance between Telco's handset markers, other guys, MNOs out there really looking at how do I create my own closed loop network versus what we offer which is a much more robust and broad open network linking agents together. So for us I see it as an evolution from a purely physical agent location base a much more virtual agent base and we think we offer very compelling proposition to a lot of the Telco's and MNOs out there in terms of if you want to do cross border remittances, let us do that for you. We specialize in the compliance in all the unique subtleties of that, the settlement aspect of it and really provide some utility back to your service.

I think the area that's going to be most slow to developer is really the whole wallet concept and I think the utility of the wallet, how the wallet works, what people can do with the money on one end or the other, the transaction is going to be something that's going to take a long time to evolve and sort out. There's a lot of people out there trying to figure out the right model there. So in the meantime I think we sit really well. I like our position, I like what we've been doing and I think we'll do more that.

Unidentified Analyst

Another product that I feel that has spilled over a little bit in some ways, we see some overlap is, the prepaid product, the GPR and how does that fit into your current set of offerings and where is your opportunity risk or threat from that, if any.

Pam Patsley

We have a prepaid card product. We have not been very aggressive in marketing it or spending direct mail marketing dollars at all. We worked a lot with our agents who offer a prepaid card product often times, that card looks more like a MoneyGram, huge, huge card than the agents. And this is particularly in the receive markets. I don't see it that we have missed the prepaid card market at all. I think you also need to know that at MoneyGram through our bill pay solution we today load, reload top up, whatever you want to call it, more a different parts of program. We also have AccountNow who is a very big issuer of prepaid cards program, that kind of links back Julio, to the first part of this section as also an affiliate program where they now through all their prepaid card programs link into MoneyGram.com and are essentially a virtual agent for us for online money transfer. So it just hasn’t been where we think we have needed to devote significant amount of our resources, worth setting it and I think there's a lot of interesting things to come on that.

Unidentified Analyst

What is the agent attitude towards all these channels, the online and the smartphones or whatever? And I guess I am asking more in perspective of channel comp because I kind of feel like this is one thing as you think about really building this out, do you create tension in your agent networks by providing these alternatives I guess.

Pam Patsley

We have not seen that. That's a great question. We have not seen that online and I would say prepaid is where we probably hear about it most and hear about it more anecdotally not as the entity in the cross hairs if you will as potentially some irritation from our agents, because we haven't been aggressive in building quite our own portfolio but rather we have taken approach working more with our agents and supporting their prepaid cards portfolio. So to the extent that cards can be the spend, cards attached or card to card or cash to card, we have just the myriad of things we're already doing around the world in different quarters in that regard.

Alex Holmes

Just to add to that, I think our focus is really on self-service. When you think about in alternative channel mechanism and what we mean by self-service is really giving the consumer more flexibility to send and receive their money and so if that means adding a mobile application, if that means an online service, if that means sending it from a card or to a card or into a bank account or someone's bank account, we want to provide that flexibility. I think the nice thing for us is that it's an evolution of the agent model and everything we do in that field today is with current agents or new agents that are just a different type of agent than we've historically had and so I think that's been very value add to what we do, when we are talking. Wal-Mart largest walk in cash to cash agent we have, they wanted to add the Walmart.com and we see that around the world. We have SBI in Japan which is an online based service and that's been a big success for us so rather than walking in with cash in Japan it's all about loading through a kiosk or through an account and then using the online service to send your fund. So it's really just very additive to what we do and it’s a nice slow evolution of the model in some ways.

And I think the cash in cash out back to your PayPal question, they do their thing from account to account, we have cash in and cash out so I think those two services are very complimentary to each other rather than necessarily competitive.

Pam Patsley

I think just a call out, it ties a little bit every bit everything back together from the technology perspective, leveraging our view and our approaches self-service and geographic growth. Today our whole business in Saudi Arabia is essentially a self-service model. So with National Commercial Bank of Saudi Arabia, it's an online registration, it's an ATM or a kiosk activated send.

Unidentified Analyst

And I guess just to come back to materiality of clients, Wal-Mart obviously we touched on a little bit with the renewal and contract there, any updates or any thoughts around what were you guys always Wal-Mart and look as we go to 2013.

Pam Patsley

We love our relationship with Wal-Mart and I think they really appreciate value. They say the word that maybe just the personality but I think they really like the relationship with MoneyGram and we continue to extend it, party Wal-Mart in India, we launched within the last year at the Walmart.com initiative. So we are keenly aware that the current contracts we have officially end January 21st, 2013 and as I like to tell people from the day I joined MoneyGram, we continue to earn Wal-Mart's business each and every day. So I'll tell you, you'll be the first to know just like everyone else.

Unidentified Analyst

Great. All right. With that let me go ahead and open up for any quick questions. We have another seven minutes or so if you can just wait for microphone. Any questions in the audience?

Question-and-Answer Session

Unidentified Analyst

Yes, just a word about compliance. So you've talked about you being highly compliant, I think the term you said. How about your competitors? Is that an advantage you have or in fact is it the tax you pay, being a US domestic sender versus a lot of these other networks around the globe.

Pam Patsley

That's an interesting question, so it’s a little bit two web store and these compliance regulations, first of all, there is a little bit of an implication that because we are in the US there really only the US originated, that's not the case. I mean Royal Bank of India, the SSA, we're generally regulated by the State Banking Authority in all countries we operate in and there are varying degrees of regulation whether its aggregation or consumer identification and so on. I think it provides on the one hand the differentiation and a really value-add core competency to MoneyGram that just really possibly won or two other players that have that kind of robust program and when you think about product extension, how this industry evolved to me, that will be a valuable part of our engine. As with everything, so the CSPB comes out with new rules, we will have to make some tweaks to what we do but only to get it in the form they are asking for but the notion that our consumers know the FX rate, they know what the receivers going to get. All these disclosures, we already do it, the form of that will have to change a little bit but the niche players, possibly are not all doing that today and so there will be a cost to them. I think it's also a barrier to entry for new. On the other hand, if they don't comply, where do regulators spend their time and initiative to go see if someone is compliant? Do they go to this small niche player? So there is the pro and the con. For us the strength of our network and the commitment to that, the changes that we've been putting in place on consumer anti-fraud are really valued by our agents, and particularly large agents really value that.

Unidentified Analyst

How do you allocate capital in between the different methods of payment? So why would you put more money into online versus mobile versus something else?

Pam Patsley

I guess the good news is, it's not a highly capital intensive business. So there is marketing and I think I already said the marketing initiative behind online, it doesn’t require a lot and the technology there has been some build but our total capital spend has been about the same for the last several years and we generally talk in the 80-85ish million dollars and that includes signing bonuses, that includes maintenance CapEx and that includes new product development. So for me, it's not really the capital needs are not such that we have to make an either/or or any really hard priority decisions between things like mobile or online. I do want to give order of magnitude an example.

Alex Holmes

I also want to give order of magnitude, but I guess I would have to say our focus has really been on system flexibility over the last couple of years and overhauling our core system functionality. So when you do that, today we have different ways in which we deploy our service into the market until we have some people who have an install directly onto a small PC. We have others who have big connections into their own point of sale systems and that's to integrate with all the modeling and get some market. At the same time it doesn't provide that much flexibility for new product roll out, new product enhancements. And so our focus really has been around how do we create a much more robust web based product that when agents install that, that service in the system into their business that we can then push out new product changes, we can push things to them rather than them having to upgrade or pull the system back the other direction. So that's where a lot of our investment has been and I think that investment is really creating that flexibility we need to when we do add a new currency and we add a new country, we do add a new direct to bank product. Its accessible to more agents, more quickly than what otherwise would be. So when you think about mobile, when you think about online, those all come off of that same core platform and so I think those enhancements are helping us universally really do that. After that it really comes back to Pam's point around where do you sort of think your marketing investment these types of things they are trying new consumers to new products.

Unidentified Analyst

I was wondering if we can dive a little bit on the radiation risk. Yesterday MasterCard was talking about the ability of transferring money from a cellphone in Saudi Arabia to a cellphone in Bangladesh and there is a mobile payment standalone was talking about something similar. That is in time aviate the need of having a physical distribution network or is that complementary to what you do? Do they need you or does that in effect circumvent and create another channel of international remittances that would obvious the need of a physical distribution network.

Pam Patsley

I think again it is generally additive and it is our job to ensure that we take what we do well and our unique capabilities and incompetances and play into that model. I think it has shown again and again in talking with PayPal and others, cash in and cash out has not gone away. The need for that and the point of presence and the recognizing of the power of the brand and that's what this brand stands for transferring money, resonates very well and I think it's our job to continue to leverage that to our advantage.

Unidentified Analyst

It seems that with the huge growth of Green Dot and some of the other prepaid business that you guys are in a unique position to dominate the potential for that business and yet you seem to think it seems like you guys think it’s a niche for you as opposed to something that could also be cooler and have substantial growth. Am I reading that right or is there a reason why you guys shouldn’t own that business. Like why does Green Dot even exist if you've got 280,000 locations, each of them could have a kiosk with some prepaid cards, it would seem a nice synergy?

Pam Patsley

Yes, I am not sure I understood the first part of the question.

Unidentified Analyst

It seems like that should be your market opportunity and it seems from the distribution it's more of a niche business to you guys then for. Like everybody who transfers money could put it on a card, you can make another fee from loading the card, that could be your entrée into having people have accounts with you and therefore lots of different ways they can offload and unload, but it doesn’t seem like that is what you're excited about.

Pam Patsley

Well we're excited about that and we work with our agents to do that so you still need those points of presence and we give those points of presence to our agent network. When the agent wants to load it on to the card and it’s a MoneyGram looking card and it's great for our brand but they hold the prepaid balance or the receivable or whatever you have, that's okay with us. I don't see prepaid cards for cross border remittance. They can be what you pull money off of. We can do that. They can be what you put money onto. That's fine. But we don't really see a model where you can go right to that without just remediating a very powerful agent network around the world.

Alex Holmes

I think there is also a point about how many of your customers in the US especially have bank accounts as well because part of what some of the prepaid guys are addressing is un-bank, under bank in some ways.

Pam Patsley

Most of our customers have some bank account but they are so afraid to touch if they have a bank account because it’s a fee structure, they operate more in a day-to-day cash model.

Unidentified Analyst

Okay with that we're actually two minutes over. So, thank you guys for doing that. I am sure we're going to have lots of more questions if we keep going here. So, thank you guys very much.

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